🏡 Before You Decide What to Do With an Inherited Home, Check the Property Taxes

🏡 Before You Decide What to Do With an Inherited Home, Check the Property Taxes

In Palos Verdes and throughout the South Bay, many family homes have been owned for decades. As home values have increased, these longtime owners may have a property-tax assessment that is far below the home's current market value.

When children inherit a parent's home, one of the first questions I suggest asking is:

What will happen to the property taxes?

The answer can make a significant difference when deciding whether to keep the home, rent it, move into it, or sell it.

How Proposition 19 Changed Inherited Property Taxes

Under current California law, Proposition 19 changed the property-tax rules for certain parent-to-child transfers.

Generally, an inherited rental property, investment property, or second home no longer qualifies for the parent-to-child reassessment exclusion that existed under prior law.

A parent's principal residence may qualify for an exclusion from reassessment if certain requirements are met. Among other requirements, an eligible child generally must make the inherited property their own principal residence within the first year after the parent’s death.

There are also important filing requirements, deadlines, and value limitations that may affect how much of the property's value can be excluded from reassessment.

For transfers occurring from February 16, 2025 through February 15, 2027, the adjusted exclusion amount used in the Proposition 19 calculation is $1,044,586—not simply $1 million.

Because every situation is different, families should understand how these rules may apply to their particular property before making a long-term decision.

Should You Keep, Rent, Move Into, or Sell an Inherited Home?

There is no single answer that is right for every family.

Before making a decision, it may be helpful to consider:

• The home's current market value

• The potential new property-tax assessment

• Whether an heir plans to use the home as a principal residence

• Are there other heirs?

• Potential rental income

• Maintenance, insurance, and ownership costs

• Capital-gains and stepped-up-basis considerations

• The financial and personal needs of multiple heirs

• Whether one family member wants to keep or live in the property

Sometimes keeping the home makes financial and personal sense. Sometimes renting it may be worth considering. In other situations, selling the property and distributing the proceeds among the heirs may be the better option.

The important thing is to understand the numbers and your options before making a decision that may be difficult to reverse.

Inherited a Home in Palos Verdes or the South Bay?

If you've inherited a home—or expect that your family may soon be dealing with an inherited property—I'm happy to help you look at the real estate side of the decision.

We can review the property's current market value, discuss potential selling or rental options, and look at the real estate considerations that may help you evaluate your choices. When appropriate, I can also coordinate with your tax, trust, or estate professionals so you have the information you need before deciding what to do with the property.

Not sure whether to keep, rent, move into, or sell an inherited home? Contact me for a confidential real estate review of your options.

This article provides general information only and is not individualized legal, tax, or financial advice. Proposition 19 and other tax rules can be complex. Consult qualified legal and tax professionals regarding your individual circumstances.